- REITs are pretty well integrated into the market now, whereas 20 years ago they were not. Now they are included in regular indexes, especially small-cap value indexes.
- REIT returns are substantially explained by the small and value factors, without adding any notable REIT factor. (probably anything remaining would be explained by the bond credit risk factor)
- IMO directly held real estate would probably be less correlated with markets, and you might get an illiquidity premium, plus cheap leverage.
- Regarding what Swenson said versus what he did: using a Bill Bernstein metaphor, Swensen was Wayne Gretzky, he skated where the puck would be in the future. People who did what he did afterwards skated where the puck used to be, and mostly ended up as failures, trailing a conventional 60/40 portfolio. For example Harvard tried to imitate him and got their ass handed to them. In this case doing what he said would have been at least as good as what he did for basically everyone else.
- Apart from his published asset allocation, what Swensen said was to identify areas where A) you could consistently create top quartile active management returns, and B) it was worthwhile to do so, and if you could not reliably do both A and B then don't bother. For example he said he would never actively manage government bond investments because even if he could, the return was not worth the effort. He thought small investors could not realistically create consistent top quartile active management returns, except largely by chance.
- I think everyone should have at least a 10% bond allocation (and never more than 40%, or even better not more than 33%, except if you truly need all the money within 5-10 years). But if you have $10,000 in a checking account and invest $40,000 new money per year, I would also agree that effectively makes a $50,000 bond allocation, and you don't really need to add more until you have more than $500,000 or are within 5 years of retirement. Though I wouldn't fault you if you did.